In a landmark judgment, the Gujarat High Court has ruled goods and services tax (GST) does not apply to the transfer of leasehold rights to a third party in land granted by Gujarat Industrial Development Corporation (GIDC).The ruling — in the Suyog Dye Chemie vs Union of India case — brings significant relief to companies that faced the burden of retrospective demand for 18 per cent GST on such lease transfers, amounting to liabilities of approximately Rs 8,000 crore only in Gujarat and Maharashtra.
The court’s decision not only alleviates the financial strain on affected businesses but also addresses long-standing concerns regarding double taxation.
It offers hope for resolving similar disputes, including those pending before the Bombay High Court, where the Chamber of Small Industry Associations has filed a writ challenging the GST implications.
The core legal issue under scrutiny is whether GST should be levied on transfers of leasehold or industrial land, given that these transactions are already subject to state-imposed stamp duty. Petitioners argued that such transfers should be treated as sales of land, which are explicitly excluded from GST.
The imposition of 18 per cent GST on each subsequent transfer has resulted in a heavy tax burden, leading to cascading taxes and rendering many transactions economically nonviable.
Source: Business Standard
